Berkeley shares at 12-month high as investors regain confidence in UK’s property market
Shares in high-end housebuilder Berkeley stand at a 12-month high, as investors are beginning to regain hope in the UK property market after a torrid few months.
The FTSE 100 firm is set to post its half year results on Friday, with its cheery outlook boosted by plans by boss Rob Perrins to storm ahead with ambitions to develop new properties, including a 3,000 homes in Ealing.
Back in October, Perrins reaffirmed the group’s guidance for the year, expecting to rack in £1.05bn in total, pre-tax, in the 2024 and 2025 fiscal years.
Analysts have predicted that Berkeley will post £540m for fiscal 2024 and £500m for 2025.
Russ Mould, investment director at AJ Bell, said: “Perrins has also flagged that 2024 profits would be split 50/50 between the first and second halves, so that implies a figure for these interim results of £270m pre-tax [profit]. That compares to £285m one year ago.”
However, analysts are predicting a 20 per cent drop in operating margin in the fiscal new year, after it sagged a little to 20.3 per cent from 21.6 per cent in the year to April 2023.
Mould added: “Berkeley also intends to return £283m, or 266p a share, to shareholders every year through to September 2025, via a mix of dividends and share buybacks.
“In the first six months of this fiscal year, Berkeley has already declared a 59.3p-per-share dividend, worth £63m with £78m of buybacks on top.”
He explained: “The next statement on the mix between buybacks and dividends is due in February and Berkeley is already on record as saying the annual dividend will be at least 66p a share, leaving up to 200p a share for buybacks.”
It comes as investors have begun backing all major housebuilders again after a surprise drop in inflation and subsequent fall in mortgage rates has improved market sentiment.
Shares in rivals Barratt Development, Vistry Group, and Persimmon have all continued to climb over the past few months, despite their latest financial results warning of challenges ahead.
Just last month Persimmon saw its share price rise over six per cent despite the firm warning of uncertainty next year.
The FTSE 250 housebuilder said the number of new homes it built in the third quarter declined by 37 per cent, but the firm was continuing to trade in line with company expectations.